July 25, 2007

Apple earnings surge; Jobs in driving seat

Apple reported earnings Wednesday that were at the high end of wildly fluctuating analyst estimates. Disappointing reports of initial iPhone activations had depressed the stock during Tuesday. However, in typically ebullient fashion, Steve Jobs led the charge during today's call. He called particular attention to the iPhone's breakthrough design, jam resistant screen and its upcoming virtual finger technology (enabling users with large digits to superimpose avatar-fingers of varying sizes onto the screen).

Nevertheless, the results have led some to question the wisdom of placing so much of Apple's future in the hands of one man. Leeward Stochs, an investment bank, estimated that up to $50B of Apple's market value comes directly from Jobs. McBainsey consultant Eric Pfeiffer went one step further claiming that Apple's entire workforce could be reduced to just Jobs and a receptionist with little downside risk.

Sneaky Business recognizes the broader problem of the CEO-centric organization. During our work with some of Belgium's largest multinational corporations we have identified three important strategies to reduce the CEO value dependency:

Create a dual CEO. As companies transition to a more effective 24x7 operation, the introduction of an alternative "night shift" CEO can have dramatic effects. Over time, as the world realizes that two individuals are actually in place, the second CEO can assume more prominent daytime activities.

Introduce deliberate mistakes. Carefully planned errors, selected for minimal financial impact, can help to reduce the halo effect of a hyper-successful CEO. A minor overseas gaffe or ill-judged CEO product demo are good examples.

Spread the persona. Encourage other executives and senior managers to adopt the persona of the CEO. By adopting an identical dress code, mimicking their management style and repeating often used phrases the value of the CEO can be seen to spread further down the organization.

We encourage the Apple board to consider such policies to help reduce its own dependency on Mr. Jobs.